SEC News Digest

Issue 2012-243 December 20, 2012

Commission Announcements

Securities and Exchange Commission Suspends Trading in the Securities of Fourteen Issuers for Failure to Make Required Periodic Filings

The U.S. Securities and Exchange Commission announced the temporary suspension of trading in the securities of the following issuers, commencing at 9:30 a.m. EST on December 20, 2012 and terminating at 11:59 p.m. EST on January 4, 2013.

The Commission temporarily suspended trading in the securities of these fourteen issuers due to a lack of current and accurate information about the companies because they have not filed periodic reports with the Commission in over two years. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act).

The Commission cautions brokers, dealers, shareholders and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by these companies.

Brokers and dealers should be alert to the fact that, pursuant to Exchange Act Rule 15c2-11, at the termination of the trading suspensions, no quotation may be entered relating to the securities of the subject companies unless and until the broker or dealer has strictly complied with all of the provisions of the rule. If any broker or dealer is uncertain as to what is required by the rule, it should refrain from entering quotations relating to the securities of these companies that have been subject to a trading suspension until such time as it has familiarized itself with the rule and is certain that all of its provisions have been met. Any broker or dealer with questions regarding the rule should contact the staff of the Securities and Exchange Commission in Washington, DC at (202) 551-5720. If any broker or dealer enters any quotation which is in violation of the rule, the Commission will consider the need for prompt enforcement action.

If any broker, dealer or other person has any information which may relate to this matter, they should immediately communicate it to the Delinquent Filings Group of the Division of Enforcement at (202) 551-5466, or by e-mail at DelinquentFilings@sec.gov. (Rel. 34-68483)

Change in the Meeting: Time Change

The Closed Meeting scheduled for Thursday, December 20, 2012 at 2:00 p.m. was changed to Thursday, December 20, 2012 at 9:00 a.m.

At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact the Office of the Secretary at (202) 551-5400.

Enforcement Proceedings

Commission Orders Hearings on Registration Suspension or Revocation Against Fourteen Companies for Failure to Make Required Periodic Filings

In conjunction with these trading suspensions, the Commission today also instituted three public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registration of each class of the securities of fourteen companies for failure to make required periodic filings with the Commission:

In these Orders, the Division of Enforcement (Division) alleges that the respective Respondents are delinquent in their required periodic filings with the Commission.

In these proceedings, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the Respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder, are true. The judge in the proceedings will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these Respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in the proceedings issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-68484; 34-68485; 34-68486)

In the Matter of David E. Ruskjer

On December 20, 2012, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Notice of Hearing (Order) against David E. Ruskjer. The Division of Enforcement alleges in the Order that from about September 2004 to December 2008, Ruskjer, individually and doing business as Ruskjer & Associates, raised approximately $16 million from at least 140 investors nationwide by selling and offering to sell securities in the form of promissory notes that purportedly paid fixed monthly interest rates ranging from 3% to 5%, and by making various fraudulent representations about the notes. No registration statement was ever filed or in effect with the Commission for the offering of the notes. During that period, Ruskjer was also acting as an unregistered broker-dealer. Ruskjer is currently incarcerated in federal prison in Sheridan, Oregon, serving a 120-month prison sentence as a result of his conviction of mail fraud and related offenses arising out the conduct alleged by the Division in the Order. United States v. David E. Ruskjer, Case No. 1:09-CR-247-HG (D. Haw.). The Division further alleges that a final judgment was entered against Ruskjer in the Commission’s civil action, following the Court’s granting of the Commission’s motion for summary judgment against Ruskjer, permanently enjoining him from future violations of Section 5 and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Exchange Act of 1934, and Rule 19b-5 thereunder. [SEC v. David E. Ruskjer, Case No. 1:09-CV-00237-HG (D. Haw.)]

A hearing will be scheduled before an administrative law judge to determine whether the Division’s allegations contained in the Order are true, to provide Ruskjer with an opportunity to respond to those allegations, and to determine what sanctions, if any, are necessary or appropriate for the protection of investors. The Order directs the administrative law judge to issue an initial decision within 210 days from the service of the Order. (Rel. 34-68499; File No.3-15147)

In the Matter of Steven A. Gould CPA

On December 20, 2012, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions against Steven Gould (Gould). According to the Order, the Commission found that Gould, age 48, is a certified public accountant currently licensed in New York. Gould was the chief financial officer of West End Financial Advisors (West End) from September 2006 to May 11, 2009. West End is a New York-based, unregistered investment adviser to a collection of hedge funds (the West End funds). West End is affiliated with Sentinel Investment Management Corporation, which has been registered with the Commission since 1986. Gould’s responsibilities at West End included overseeing West End’s accounting department, maintaining financial records for investment funds that West End managed, and preparing monthly account statements sent to West End investors. According to the Order, the Commission found that on September 25, 2012, the U.S. District Court for the Southern District of New York entered a final judgment against Gould, permanently enjoining him from future violations, direct or indirect, of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, in the civil action entitled Securities and Exchange Commission v. Landberg, et al., 11-CV-0404 (PKC). Gould was also ordered to pay a $130,000 civil money penalty. The Commission’s amended complaint alleged that between at least January 2008 and May 2009 Gould knew, or was reckless in not knowing, that the returns West End funds were generating were not adequate to meet the funds’ obligations. Account statements that Gould prepared misrepresented the returns of the West End funds. Gould was aware of the extensive commingling of assets among West End funds. Gould also facilitated the misuse of funds from a reserve account that was to be maintained on behalf of a lender to a West End fund and devised an accounting mechanism to disguise at least one instance where money was improperly taken from the account. Gould was also aware that investments were being used in ways that were inconsistent with what had been represented to West End’s investors.

Based on the above, the Order bars Gould from association with any broker, dealer, investment adviser, municipal securities dealer, or transfer agent. The Order also suspends Gould from appearing or practicing before the Commission as an accountant. Gould consented to the issuance of the Order without admitting or denying any of the findings in the Order, except he admitted the entry of the injunction. (Rel. 34-68500; IA-3523; AAE Rel. 3433; File No. 3-15148)

In the Matter of Carl N. Duncan

On December 20, 2012, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission’s Rules of Practice, Making Findings and Imposing Remedial Sanctions (Order) against Carl N. Duncan. The Order finds that on September 27, 2012, the Commission filed a complaint in the United States District Court for the Southern District of New York against Duncan alleging violations of Sections 5(a), 5(c) and 17(a)(2) of the Securities Act of 1933 (“the Securities Act”). On December 10, 2012, the court entered a final judgment by consent permanently enjoining him from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act. Additionally, the final judgment: (a) prohibits Duncan from participating in the preparation or issuance of any opinion letter in connection with the offer or sale of securities pursuant to, or claiming an exemption under Section 4(1) of the Securities Act [15 U.S.C. § 77d(1)] and Rule 144 or Rule 802 under the Securities Act [17 C.F.R. §§ 230.144 and 230.802], including without limitation, signing an opinion letter or preparing an opinion letter to be signed by another person, related to such offering; (b) permanently bars Duncan from participating in an offering of penny stock, including engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading, or inducing or attempting to induce the purchase or sale of any penny stock; and (c) requires Duncan to pay disgorgement and prejudgment interest thereon in the amount of $16,094.98, and a civil money penalty in the amount of $25,000.00. The Commission’s complaint alleged, among other things, that Duncan prepared and issued false legal opinions and letters to the transfer agent, OTC Markets Group, Inc., and the Depository Trust and Clearing Corporation in connection with a scheme to inflate trading volume in the common shares of 8000, Inc. and the company’s stock price.

Based on the above, the Order suspends Carl Duncan from appearing or practicing before the Commission as an attorney. Carl Duncan consented to the issuance of the Order without admitting or denying findings except he admitted the entry of the final judgment. (Rel. 34-68501; File No. 3-15149)

SEC Charges Eli Lilly and Company with FCPA Violations

The Securities and Exchange Commission today charged Eli Lilly and Company with violations of the Foreign Corrupt Practices Act (FCPA) for improper payments its subsidiaries made to foreign government officials to win millions of dollars of business in Russia, Brazil, China, and Poland.

The SEC alleges that the Indianapolis-based pharmaceutical company’s subsidiary in Russia used offshore “marketing agreements” to pay millions of dollars to third parties chosen by government customers or distributors, despite knowing little or nothing about the third parties beyond their offshore address and bank account information. These offshore entities rarely provided any services and in some instances were used to funnel money to government officials in order to obtain business for the subsidiary. Transactions with offshore or government-affiliated entities did not receive specialized or closer review for possible FCPA violations. Paperwork was accepted at face value and little was done to assess whether the terms or circumstances surrounding a transaction suggested the possibility of foreign bribery.

The SEC alleges that when the company did become aware of possible FCPA violations in Russia, Lilly did not curtail the subsidiary’s use of the marketing agreements for more than five years. Lilly subsidiaries in Brazil, China, and Poland also made improper payments to government officials or third-party entities associated with government officials. Lilly agreed to pay more than $29 million to settle the SEC’s charges.

“When a parent company learns tell-tale signs of a bribery scheme involving a subsidiary, it must take immediate action to assure that the FCPA is not being violated,” said Antonia Chion, Associate Director in the SEC Enforcement Division. “We strongly caution company officials from averting their eyes from what they do not wish to see.”

Kara Novaco Brockmeyer, Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Unit, added, “Eli Lilly and its subsidiaries possessed a ‘check the box’ mentality when it came to third-party due diligence. Companies can’t simply rely on paper-thin assurances by employees, distributors, or customers. They need to look at the surrounding circumstances of any payment to adequately assess whether it could wind up in a government official’s pocket.”

As alleged in the SEC’s complaint filed in federal court in Washington D.C.:

Lilly’s subsidiary in Russia paid millions of dollars to offshore entities for alleged “marketing services” in order to induce pharmaceutical distributors and government entities to purchase Lilly’s drugs, including approximately $2 million to an offshore entity owned by a government official and approximately $5.2 million to offshore entities owned by a person closely associated with an important member of Russia’s parliament. Despite the company’s recognition that the marketing agreements were being used to “create sales potential” with government customers and that it did not appear that any actual services were being rendered under the agreements, Eli Lilly allowed its subsidiary to continue using the agreements for years.

Employees at Lilly’s subsidiary in China falsified expense reports in order to provide spa treatments, jewelry, and other improper gifts and cash payments to government-employed physicians.

Lilly’s subsidiary in Brazil allowed one of its pharmaceutical distributors to pay bribes to government health officials to facilitate $1.2 million in sales of a Lilly drug product to state government institutions.

Lilly’s subsidiary in Poland made eight improper payments totaling $39,000 to a small charitable foundation that was founded and administered by the head of one of the regional government health authorities in exchange for the official’s support for placing Lilly drugs on the government reimbursement list.

Lilly agreed to pay disgorgement of $13,955,196, prejudgment interest of $6,743,538, and a penalty of $8.7 million for a total payment of $29,398,734. Without admitting or denying the allegations, Lilly consented to the entry of a final judgment permanently enjoining the company from violating the anti-bribery, books and records, and internal controls provisions of the FCPA. Lilly also agreed to comply with certain undertakings including the retention of an independent consultant to review and make recommendations about its foreign corruption policies and procedures. The settlement is subject to court approval.

The SEC’s investigation was conducted by Steven A. Susswein. The SEC acknowledges the assistance of the U.S. Department of Justice’s Fraud Section and the Federal Bureau of Investigation. (Press Rel. 2012-273; [SEC v. Eli Lilly and Company, Civil Action No. 1:12-cv-02045 (D.D.C.)] (LR-22576)

INVESTMENT COMPANY ACT RELEASES

UBS AG, et al.

A temporary order has been issued to UBS AG, et al. under Section 9(c) of the Investment Company Act of 1940 (Act) with respect to a guilty plea entered on December 19, 2012, by UBS Securities Japan Co., Ltd. (Settling Firm) in the U.S. District Court for the District of Connecticut in connection with a plea agreement between the Settling Firm and the U.S. Department of Justice. The temporary order exempts applicants and companies of which the Settling Firm is or becomes an affiliated person from the provisions of Section 9(a) of the Act until the Commission takes final action on an application for a permanent order or, if earlier, February 15, 2013. (Rel. IC-30311 - December 19)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by Financial Industry Regulatory Authority, Inc. to extend the date by which eligible registrants must complete a Firm-Element Continuing Education Program to qualify to engage in a security futures business (SR-FINRA-2012-055) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of December 24. (Rel. 34-68468)

A proposed rule change filed by NYSE MKT LLC to amend Section 140 of the NYSE MKT LLC Company Guide to introduce an Initial Application Fee (SR-NYSEMKT-2012-70) has become effective under Section 19(b)(3)(A) of the Exchange Act. Publication is expected in the Federal Register during the week of December 24. (Rel. 34-68469)

A proposed rule change filed by the New York Stock Exchange LLC to amend Sections 902.02 and 902.03 of the New York Stock Exchange LLC Listed Company Manual to introduce an Initial Application Fee (SR-NYSE-2012-68) has become effective under Section 19(b)(3)(A) of the Exchange Act. Publication is expected in the Federal Register during the week of December 24. (Rel. 34-68470)

A proposal filed by the Financial Industry Regulatory Authority, Inc. (SR-FINRA-2012-056) to implement changes to extend the expiration date of FINRA Rule 0180 (Application of Rules to Security-Based Swaps) has become immediately effective pursuant to Section 19(b)(3) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of December 24. (Rel. 34-68471)

A proposed rule change filed by NASDAQ OMX PHLX LLC Relating to the Permit and Order Entry Port Fee (SR-Phlx-2012-140) has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of December 24. (Rel. 34-68473)

A proposed rule change filed by NYSE Arca, Inc. amending NYSE Arca Rule 6.65 - Trading Halts and Suspensions (SR-NYSEARCA-2012-141) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of December 24. (Rel. 34-68474)

A proposed rule change filed by Financial Industry Regulatory Authority, Inc. to add the term Chief Legal Officer to the definition of General Counsel (SR-FINRA-2012-054) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of December 24. (Rel. 34-68475)

The Commission issued notice of filing and immediate effectiveness of a proposed rule change (SR-BOX-2012-023) filed by BOX Options Exchange LLC pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 to increase the position and exercise limits for options on the iShares MSCI Emerging Markets Index Fund to 500,000 contracts. Publication is expected in the Federal Register during the week of December 24. (Rel. 34-68478)

A proposed rule change filed by C2 Options Exchange, Incorporated relating to the Options Regulatory Fee (SR-C2-2012-040) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of December 24. (Rel. 34-68479)

A proposed rule change filed by Chicago Board Options Exchange, Incorporated relating to the Options Regulatory Fee (SR-CBOE-2012-118) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of December 24. (Rel. 34-68480)

Approval of Proposed Rule Change

The Commission granted approval of a proposed rule change filed by the Municipal Securities Rulemaking Board (SR-MSRB-2012-08) consisting of amendments to streamline new issue information submission requirements under MSRB Rules G-32 and G-34. Publication is expected in the Federal Register during the week of December 24. (Rel. 34-68472)

ICE Clear Credit LLC (ICC) filed a proposed rule change (SR-ICC-2012-23) under Section 19(b)(1) of the Securities Exchange Act of 1934 to add rules related to the clearing of iTraxx Europe Index CDS. Publication is expected in the Federal Register during the week of December 24. (Rel. 34-68481)

SECURITIES ACT REGISTRATIONS

The following registration statements have been filed with the SEC under the Securities Act of 1933. The reported information appears as follows: Form, Name, Address and Phone Number (if available) of the issuer of the security; Title and the number and/or face amount of the securities being offered; Name of the managing underwriter or depositor (if applicable); File number and date filed; Assigned Branch; and a designation if the statement is a New Issue.

Amendments to the Registrant's Code of Ethics, or Waiver of a Provision of the Code of Ethics

5.06

Change in Shell Company Status

6.01

ABS Informational and Computational Material.

6.02

Change of Servicer or Trustee.

6.03

Change in Credit Enhancement or Other External Support.

6.04

Failure to Make a Required Distribution.

6.05

Securities Act Updating Disclosure.

7.01

Regulation FD Disclosure

8.01

Other Events

9.01

Financial Statements and Exhibits

8-K reports may be viewed in person in the Commission's Public Reference Branch at 100 F Street, N.E., Washington, D.C. To obtain paper copies, please refer to information on the Commission's Web site at http://www.sec.gov/answers/publicdocs.htm. In most cases, you can view and download this information by using the search function located at http://www.sec.gov/edgar/searchedgar/companysearch.html.